Craig Kelly planning to quit the Liberal Party as government braces for more defections

Liberal MP Craig Kelly plans to run as an independent at the next election and is being urged to quit the party immediately, in the latest blow to unity inside the Morrison government.

Mr Kelly did not rule out leaving the Liberals before the election, but told Fairfax Media on Wednesday night he would not defect before Parliament rises for the year on December 6.

Liberal MP Craig Kelly privately concedes he will not be preselected and is planning to run as an independent.Credit:Alex Ellinghausen

The Coalition is braced for further upheaval following Julia Banks' bombshell resignation on Tuesday, and MPs are openly speculating about who could be next - with Mr Kelly top of the list.

Deputy Liberal leader and Treasurer Josh Frydenberg - the most senior Victorian in the Coalition - cancelled his planned trip to the G20 economic forum in Argentina this weekend amid the fallout from the Liberals' state election loss and Ms Banks' defection.

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Some MPs fear there is "more to come". Mr Kelly - a conservative MP from southern Sydney - has privately conceded he has no chance of retaining preselection in the face of a push by moderate Liberal members who have the numbers to remove him.

Confidantes of Mr Kelly are urging him to quit the Liberal Party now to build momentum to run against Kent Johns - the presumptive Liberal candidate in Hughes - as an independent.

Independent MP Julia Banks and Labor's Anne Aly after a division in the House of Representatives.Credit:Dominic Lorrimer

Former Liberal Party presidential candidate John Ruddick - a familiar face in the party's right-wing - said he had counselled Mr Kelly to "bite the bullet now and run as an independent ... because there is a 100 per cent chance he is going to lose his preselection".

Mr Kelly could simply rejoin the Liberals after the election, Mr Ruddick suggested. Asked on Wednesday evening about Mr Ruddick's comments, Mr Kelly said quitting the party was "a future possibility" but he looked forward to contesting Liberal preselection on his record.

"I'm still very hopeful in a preselection contest. The only thing I would say is I would hope that any preselection process happens sooner rather than later," he said. "My 100 per cent concentration is on my job which is to represent my electorate until the end of this term."

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A senior Liberal source confirmed the party was delaying the preselection in Hughes as long as possible in case Mr Kelly went rogue, but they would be forced to bring it forward if he quits and joins the crossbench.

Mr Ruddick told Fairfax Media the war engulfing the Coalition would worsen and was in "a whole different dimension" to the woes that afflicted Labor under Kevin Rudd and Julia Gillard.

"This is a philosophical and structural war," said Mr Ruddick, who is not presently a party member. "That’s why it’s going to only escalate post the two coming elections."

Illustration: Matt GoldingCredit:

Ms Banks' defection to the crossbench kept reverberating on Wednesday, with her former colleagues speculating she could run as an independent in her seat of Chisholm, or even challenge Health Minister Greg Hunt in Flinders or backbencher Michael Sukkar in Deakin.

Ms Banks did not respond to a request for comment.

Former frontbencher Craig Laundy, a close friend of deposed former prime minister Malcolm Turnbull who was deeply angered by the leadership coup, ruled out quitting the party but has not decided whether to recontest his Sydney seat of Reid.

But NSW Liberal senator Jim Molan was so upset at being relegated to an unwinnable spot on the party's ticket he pulled out of a scheduled appearance on the ABC's Q&A, saying he could not defend the party at present.

He ruled out leaving the Liberal Party but told Fairfax Media: "All options other than changing parties are open to me."

Prime Minister Scott Morrison will still attend the G20 meeting, which starts on Friday, while Finance Minister Mathias Cormann will fill in for Mr Frydenberg.

However, Mr Morrison will no longer meet with US President Donald Trump. His office said it was not necessary as there were no pressing issues at the moment and he recently met with US Vice-President Mike Pence.

"The PM will no doubt have the opportunity to touch base with President Trump during the G20 meetings," a spokesman said. "The relationship is being well managed."

The Morrison government's precarious position on the floor of the House has also put the spotlight back on whether Labor will try to refer Home Affairs Minister Peter Dutton's eligibility to the High Court.

The government put the pressure back on Labor by threatening revenge referrals of opposition MPs Tony Zappia, Mike Freelander, Anne Aly and independent Kerryn Phelps - which frontbencher Christopher Pyne warned would "definitely" happen if Mr Dutton was referred.

That threat is being taken seriously by Labor. Crossbenchers including Andrew Wilkie are in favour of a "bloc referral" of MPs who may have questions to answer, not just Mr Dutton.

Uncertainty around the Home Affairs Minister's eligibility arises from a family trust which indirectly owns childcare centres that have received government benefits. Section 44 of the Constitution precludes MPs having a direct or indirect financial interest in an agreement with the Commonwealth.